Energy boom due to fracking boosts manufacturers, but where are the jobs?

Energy costs have become a competitive advantage for U.S. manufacturers, thanks largely to the boom in domestic shale oil and natural gas production.

Manufacturers consume a lot of energy, particularly natural gas. Increased domestic production of natural gas has lowered its price, and a new study by IHS estimates industrial production will increase by 3.5 percent by the end of this decade as a result of the shale energy revolution.

“This report confirms that manufacturers’ best days are ahead and that the shale revolution could spur economic growth and job creation for years to come,”said Jay Timmons, president and CEO of the National Association of Manufacturers.

NAM teamed with trade associations ranging from the U.S. Chamber of Commerce to the American Chemistry Council to fund the IHS study. You can find a summary of the study's findings here, but the main takeaway is this: Fracking is good for the economy, so don't try to stop it. Fracking is shorthand for hydraulic fracturing, the controversial method of extracting oil and natural gas from geologic formations.

Thanks largely to fracking, "energy costs have been a net positive for manufacturers in the past two years," Timmons said today in a press call highlighting the IHS study.

"This report confirms that manufacturers' best days are ahead and that the shale revolution could spur economic growth and job creation for years to come," he said.

That won't happen, however, if states and the federal government go too far in regulating fracking, NAM contends. Many environmentalists contend tracking can contaminate ground water and pollute the air.

But if oil and natural gas production from fracking continues to grow, there will be a "durable manufacturing renaissance" in the U.S., Timmons said, and manufacturers will add a lot more workers.

The problem with this bullish scenario is that manufacturers aren't creating many jobs now, despite the lower energy costs derived from fracking. Manufacturers added only 6,000 jobs in July, according to the Bureau of Labor Statistics, and averaged only 24,000 jobs on net over the first seven months of 2013. The BLS will report jobs numbers for August on Friday.

Timmons said increased productivity is one reason why manufacturers aren't creating more jobs. The second reason is the "tremendous amount of uncertainty" facing manufacturers, particularly when it comes to regulation. New environmental rules could drive up costs, the National Labor Relations Board could make it easier for unions to organize work sites, and health care reform could make insurance more expensive, he said.

Without this regulatory uncertainty, there would be "a potential for a significant amount of job growth" at manufacturers, he said.

The good news is that by lowering energy costs, the shale oil and natural gas boom "frees up vast amounts of resources for companies to deal with some of these problems that we're facing from regulatory agencies," Timmons said.